Fear and greed: The personal story behind national economic woe

August 19, 2014 01:00
By Achara Deboonme
achara_d@nat

When you turn 50, one question begins ringing repetitively in your head: "Will I have enough money to get by until the day I depart this world?"

Believe me, this is a question that nags people from all walks of life and every social class. It explains why the rich want to get richer, why regular people are calling for more government support and why the have-nots feel doomed.

It is always difficult to gauge whether you have enough money in hand. For millionaires, a bad investment decision can mean large losses. For regular people with money in bank accounts or mutual funds, their savings have suffered years of below-inflation deposit rates and instability in the financial markets. The have-nots, of course, are in the unfortunate position of not having to think about this.

Those on average incomes tend to put security first when it comes to savings and so usually keep their money in the bank. But this also comes with risk, given the low rates right now. At 1.7 per cent, the lowest 12-month fixed rate belongs to Kasikornbank and Siam Commercial Bank. Though LH Bank offers the highest at 2.95 per cent, that is only slightly above the Commerce Ministry’s projected inflation figures, recently cut from 2.40 to 2.35 per cent for 2014.

At that rate, a Bt1-million deposit at LH Bank will generate only 0.6 per cent (Bt6,000 net) over the next year. Worse, a deposit at one of several other banks would mean a loss of value.

Realising this, some of us opted to channel part of our savings to mutual funds. If your focus was on Thai stocks, your decision has proved wise. In the first half of the year, funds focusing on domestic stocks gained 12.9 per cent on average, as the SET Index rose 14.40 per cent in the period. If that return is maintained throughout the year, an investment of Bt1 million would yield over Bt120,000.

Mutual funds have been a wise investment choice for the wealthy, too. The first six months of this year saw the launch of more than 100 funds focusing on high-yield bonds for accredited investors only, according to top fund researcher Morningstar.

The mutual fund industry showed 17-per-cent growth in this period. At the end of June, the net asset value (NAV) of all mutual funds stood at Bt3.6 trillion.

These depositors and investors are benefiting the economy, as banks are re-lending their deposits to needy enterprises, while mutual funds provide liquidity in the capital market – making it a more attractive place for companies to raise funds.

What is more worrisome is speculative property purchases and over-consumption of luxury goods.

Economists have warned that negative real-deposit rates generally cause an increase in such consumption and investment, which could jeopardise sustainable economic growth.

Well, many of us (especially youngsters) refuse to look ahead more than 10 years. The young see unlimited possibilities for making money, and luxury items are the reward for their hard work.

But if you have swapped savings for real estate, you could also be in for a pleasant surprise. According to the Real Estate Information Centre, condominium prices in Bangkok rose 4.7 per cent on average in the first half. That more than beats inflation.

Of course some people choose to take a short cut to wealth. It saddens me to hear about the rewards of the narcotics trade. Even a small player can have millions in the bank and own several houses, some as big as palaces. A house-buyer friend of mine was being shown around a grand property by the owner recently. The owner said she had bought two adjoining houses, one for her family and the other for her mother. The for-sale house was furnished, yet it was priced lower than a similar empty unit the developer was selling. These and other clues led me to suspect the owner was a drug dealer.

Behind the sensational headlines about drug busts lies a dirty truth: some Thais are prepared to trade on the misery of others just to get rich quick.

Why are they so greedy? Well, all humans are greedy, but those with a conscience can suppress their greed. Others, though, are shameless and willing to exploit any opportunity. Greed like this is worst when it involves government officials. It always amazes me to learn of officials who earned little and faced large family expenses yet retired with a big house and Bt100 million-plus in the bank.

Tighter law enforcement is one remedy perhaps.

Before the law as we know it came into existence, the threat of punishment by supernatural powers kept people in line. Now, punishment is dictated by human laws – with very-human loopholes. Get rich first, and money can always buy you out of problems that ensue.

Would it help if all of us were assured of government support when we got old? Would that curb the greed and fear? Perhaps. But then again, even countries with the best social security in the world suffer from their share of corruption and criminality.

Believe me, this is a question that nags people from all walks of life and every social class. It explains why the rich want to get richer, why regular people are calling for more government support and why the have-nots feel doomed.

It is always difficult to gauge whether you have enough money in hand. For millionaires, a bad investment decision can mean large losses. For regular people with money in bank accounts or mutual funds, their savings have suffered years of below-inflation deposit rates and instability in the financial markets. The have-nots, of course, are in the unfortunate position of not having to think about this.

Those on average incomes tend to put security first when it comes to savings and so usually keep their money in the bank. But this also comes with risk, given the low rates right now. At 1.7 per cent, the lowest 12-month fixed rate belongs to Kasikornbank and Siam Commercial Bank. Though LH Bank offers the highest at 2.95 per cent, that is only slightly above the Commerce Ministry’s projected inflation figures, recently cut from 2.40 to 2.35 per cent for 2014.

At that rate, a Bt1-million deposit at LH Bank will generate only 0.6 per cent (Bt6,000 net) over the next year. Worse, a deposit at one of several other banks would mean a loss of value.

Realising this, some of us opted to channel part of our savings to mutual funds. If your focus was on Thai stocks, your decision has proved wise. In the first half of the year, funds focusing on domestic stocks gained 12.9 per cent on average, as the SET Index rose 14.40 per cent in the period. If that return is maintained throughout the year, an investment of Bt1 million would yield over Bt120,000.

Mutual funds have been a wise investment choice for the wealthy, too. The first six months of this year saw the launch of more than 100 funds focusing on high-yield bonds for accredited investors only, according to top fund researcher Morningstar.

The mutual fund industry showed 17-per-cent growth in this period. At the end of June, the net asset value (NAV) of all mutual funds stood at Bt3.6 trillion.

These depositors and investors are benefiting the economy, as banks are re-lending their deposits to needy enterprises, while mutual funds provide liquidity in the capital market – making it a more attractive place for companies to raise funds.

What is more worrisome is speculative property purchases and over-consumption of luxury goods.

Economists have warned that negative real-deposit rates generally cause an increase in such consumption and investment, which could jeopardise sustainable economic growth.

Well, many of us (especially youngsters) refuse to look ahead more than 10 years. The young see unlimited possibilities for making money, and luxury items are the reward for their hard work.

But if you have swapped savings for real estate, you could also be in for a pleasant surprise. According to the Real Estate Information Centre, condominium prices in Bangkok rose 4.7 per cent on average in the first half. That more than beats inflation.

Of course some people choose to take a short cut to wealth. It saddens me to hear about the rewards of the narcotics trade. Even a small player can have millions in the bank and own several houses, some as big as palaces. A house-buyer friend of mine was being shown around a grand property by the owner recently. The owner said she had bought two adjoining houses, one for her family and the other for her mother. The for-sale house was furnished, yet it was priced lower than a similar empty unit the developer was selling. These and other clues led me to suspect the owner was a drug dealer.

Behind the sensational headlines about drug busts lies a dirty truth: some Thais are prepared to trade on the misery of others just to get rich quick.

Why are they so greedy? Well, all humans are greedy, but those with a conscience can suppress their greed. Others, though, are shameless and willing to exploit any opportunity. Greed like this is worst when it involves government officials. It always amazes me to learn of officials who earned little and faced large family expenses yet retired with a big house and Bt100 million-plus in the bank.

Tighter law enforcement is one remedy perhaps.

Before the law as we know it came into existence, the threat of punishment by supernatural powers kept people in line. Now, punishment is dictated by human laws – with very-human loopholes. Get rich first, and money can always buy you out of problems that ensue.

Would it help if all of us were assured of government support when we got old? Would that curb the greed and fear? Perhaps. But then again, even countries with the best social security in the world suffer from their share of corruption and criminality.